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Imbert: Fund drawdown was to protect T&T economy

DRAWING down from the Heritage and Stabilisation Fund was necessary to ensure the economy does not collapse.

Finance Minister Colm Imbert yesterday justified the withdrawal of US$251 million from the fund at the post-Cabinet news conference at the Diplomatic Centre in St Ann’s.

He said in previous years when Government was running on a deficit, money deposited into the fund was borrowed, which made no sense.

He said the technocrats warned the previous government about this but they did not want to touch it as they viewed the fund as a “sacred cow”.

He said Government will move to separate the fund into two components, one for saving and the other for utilisation and the “new rules” of the fund will be based on reality.

“If you are running a deficit then certainly you should be able to withdraw from your savings, that’s what your savings are for,” he said.

The national budget, he said, was premised on a deficit (the shortfall between revenue and expenditure) estimated to be about $6 billion which is going to be financed through different mechanisms—borrowing and withdrawing from the fund.

“We have drawn down $1.7 billion from the fund so the remainder of the $6 billion, which will be $4.3 billion will be financed through borrowing and that is going to be used for the Public Sector Investment Programme which is a total of $5.1 billion,” he said.

Imbert said Government entered office and met an expenditure of $63 billion.

Government injects the majority of funds into the economy, he said, as he pointed out that GDP was $145 billion and Government’s expenditure was just over $50 billion which accounted for one-third of the national GDP.

“We are the largest spender in the economy and if we reduce expenditure too much then the economy will collapse, so there is a certain point beyond which we cannot go and all of the advisers have told us that point is in the vicinity of $52/$53 billion, if you go below that you stop economic growth, you can’t do your construction programmes, you can’t have your social safety net, you can’t maintain employment and you can’t provide the stimulus required for industry to create the jobs and the activity to recover from a recession,” he said. “So we are at that point right now at about $52 billion and I can’t see going below that because it will be harmful for the economy,” said Imbert.

He said when the fund is divided, the heritage component will not be touched unless very “special criteria” are satisfied.

The stabilisation component will be used in the way that it is being used now to assist whenever there is a shortfall.

Foreign exchange

On the issue of the continued shortage of foreign exchange, Imbert said a statement will be made soon on changes to come.

“Two years ago we were earning $19b a year from petroleum, now we are earning $2 (billion), so that is $17b in foreign exchange because all of the revenue we earn from petroleum is earned in US dollars…so we have lost 90 per cent of our revenue from petroleum over the last two years… and that’s all in foreign exchange.

“So there is a foreign exchange problem and that will continue until and unless the revenues from petroleum recover or we generate further exports (from) companies in Trinidad and Tobago,” he said.

Government has to start focusing away from entities that simply import manufactured goods and thereby don’t really create any jobs towards assisting local manufacturers who are exporting goods to Central America, he said. “…In fact, it is one of the things we are looking at in terms of the foreign exchange system, whether the Minister should exercise his authority under the Exchange Control Act to direct foreign exchange towards manufacturing as opposed to imports and I can tell you it’s something we are looking at very seriously and a statement will be made about that in the near future,” Imbert said.

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